Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of 600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the eliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described pove. The income-tax rate is 25% and the after-tax MARR is 10%. etermine the taxable income for Year 2 (only - not a total) if they decide to continue with manual mixing.

Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of 600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the eliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described pove. The income-tax rate is 25% and the after-tax MARR is 10%. etermine the taxable income for Year 2 (only - not a total) if they decide to continue with manual mixing.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 7E

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Michelin is considering going ‘‘lights-out’’ in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $590,000per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,250,000, with $93,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $275,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class. Part a Determine the annual cost of purchasing the new technology. $enter a dollar amount Carry all interim…
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